Content provided courtesy of USAA.
by JJ Montanaro, ®CFP
Planning and the military go together like peanut butter and jelly.
Think about it. Virtually all military operations begin with some sort of detailed planning process. That same approach will help you get off to a good start with your personal finances.
Here are eight money moves to make early in your military career:
- Build a budget. If you don’t have one, you’re not alone. Too many people fail to map out where their money goes, so I’ve placed this first on my list. Developing a detailed list of what comes in and a plan for what goes out is the first step to taking charge of your money. And don’t forget that regular saving should be part of your what-goes-out list.
- Save for emergencies. Having money set aside in a savings account for the unexpected is a must. Start with an achievable goal, say $1,000, and then build until you can cover three to six months of expenses. Set up an allotment on the Defense Department’s myPay website or arrange an automatic transfer to move money into your savings account each payday. Start small, if you must — even $25 to $50 a paycheck will get the ball rolling.
- Sign up for the TSP. The military’s version of a 401(k) is called the Thrift Savings Plan, and it’s a great way to save for your future. You can sign up to contribute a portion of each paycheck to this tax-advantaged account on myPay.
- Guard your credit. Your credit report and accompanying score are important — and fragile. You get off to a good start by using credit responsibly, so pay on time every time. When it comes to credit cards, don’t borrow what you can’t pay back by the end of the month. You can check your report at annualcreditreport.com and get your score for free by contacting the nearest military financial counselor.
- Protect your stuff. A renters insurance policy is a great way to help protect your uniforms, computers, phones and whatever else you have — and will accumulate — over the years. Having one makes sense, even if you live on base, and they’re typically fairly inexpensive.
- Use pay increases to your advantage. No, I’m not saying go out on a shopping spree — exactly the opposite. You should see plenty of raises while you serve: annual pay raises, promotions, special pays, time-in-service increases and the like. If you commit to using half of each pay raise to boost your savings instead of your spending, you’ll be headed in the right direction.
- Read up on the SCRA. Yep, another acronym. The Servicemembers Civil Relief Act is a law with which you should become familiar. Did you have some debt (credit card, student loans, etc.) before you joined the military? The SCRA can put a 6% interest rate cap on pre-service debts, and it offers a host of other protections.
- Visit a financial counselor. Counseling isn’t just for people struggling with money. Actually, it can be a great help to anyone — especially when it’s free and offers you the chance to understand and take charge of your own finances. Every installation has personal financial managers and classes to help you do just that.
Before you’re too far into your military career, take the time to build a foundation that will last a lifetime. It’s the first step toward financial security and a solid choice as you embark on your service to our nation.